Mainers urged to use care when pre-buying oil

PORTLAND, Maine—Consumers looking to buy oil in advance of the upcoming heating season should be cautious and ask questions, state and industry officials agree.

The warning comes ahead of Tuesday's foreclosure auction of Veilleux Oil & Services Inc., a defunct Biddeford dealer charged with accepting money from customers and failing to deliver heating oil last season.

At a time when volatile energy prices and an ongoing credit squeeze could put some dealers out of business, the Maine Attorney General's Office says consumers who sign pre-buy contracts should ask dealers to spell out how they will provide oil at the agreed price.

"Ask them to explain how they're going to get oil for the winter," said Linda Conti, an assistant Maine attorney general. "We want people to ask questions."

Under a 2005 law, dealers must obtain financial protection to ensure that they can fulfill their contracts and to specify to consumers how the protection has been secured. Protection can include contracts with wholesalers that guarantee the ability to buy 75 percent of the gallons needed for customers at a fixed price, a surety bond or a letter of credit.

That notification, however, doesn't typically appear to be taking place.

"We're telling dealers they need to come into compliance," Conti said. "It's a fairly new law."

In New Hampshire, a law that took effect last September also requires dealers to demonstrate they can fulfill their pre-buy contracts. They can do that by posting a bond or getting a loan guarantee to cover any surge in their costs, or they can sign contracts to buy fuel in the future at a specified price.

It also requires clear wording in pre-buy contracts and bars dealers from signing them before Jan. 1 for the 12-month heating season that begins each May 1.

New Hampshire's law was proposed after Concord-based Rumford Energy abruptly closed and filed for bankruptcy. More than 450 customers lost money they had paid in advance for fuel.

Thousands of Maine and New Hampshire customers lost money in 2000 when J.L. Oliver Enterprises of Berlin, N.H., offered cut-rate prices but closed when it couldn't afford to buy the oil. In 2006, central Maine residents wound up without oil they had bought when Oakland-based Petroleum Products Cooperative of Maine declared bankruptcy.

Those in the industry suggest that the best protection for customers is to seek out established dealers with good track records.

Reputable companies secure their oil purchases as a matter of good business practice, said Jamie Py, president of the Maine Oil Dealers Association. Otherwise, they're gambling that prices will drop later in the winter when the delivery is due.

"You're gambling with your money and your customer's money," he said.

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Information from: Portland Press Herald, http://www.pressherald.com